DME Oman crude hits four-year high above $90

Overtakes Brent for a second session

SINGAPORE, Sept 26, (RTRS): Oman crude futures on the Dubai Mercantile Exchange touched their highest in four years at just above $90 a barrel on Wednesday, overtaking ICE Brent for a second session, data from the exchanges showed.

DME Oman jumped more than $6 to settle at $88.96 a barrel at 0830 GMT, Asia’s market close, while the one-minute marker for ICE Brent was at $82.14.

“DME Oman has gone crazily high,” a Singapore-based trader said. The strength in the Middle East sour crude benchmark took traders by surprise as it typically trades below low-sulphur Brent due to its lesser quality.

Oil supply will tighten in the fourth quarter as US sanctions on Iran and Venezuela have cut medium-heavy sour crude supplies while Asian refiners ramp up output before winter, traders from oil majors and large trading houses said. A recovery in Chinese refining margins and Chinese independent refiners rushing to use up their quotas before year-end have also boosted spot crude demand in Asia, traders said.

Squeeze

“There is a short squeeze for sure. Ninety percent of Oman goes to China so the only conclusion is Chinese demand both from the state-owned companies and teapots,” a second Singapore-based trader said.

November DME Oman’s premium to Dubai swaps hit the highest in years at $10.48 a barrel on Wednesday, up from $4.22 the previous day, according to Reuters calculations and trade sources.

This has widened DME Oman’s price gap to cash Dubai, another Middle East benchmark, which was priced at a premium of $1.57 a barrel to Dubai swaps.

The DME Oman price has surged during a week in which most traders are tied up in meetings at Asia’s largest oil gathering, APPEC, in Singapore.

The sharp price gain also came just days before Saudi Aramco switches partly to DME pricing for term crude supplies it sells to Asia in October.

“It’s scary as it’s happening before October,” a trader with a North Asian refiner said, adding that refiners will be concerned how this could impact prices for Saudi oil.